Assume that interest rate parity exists and will continue to exist. As of today, the one-year interest rate of Singapore is 4% versus 7% in the U.S. The Singapore central bank is expected to decrease interest rates in the future so that as of December 1, you expect that the one-year interest rate in Singapore will be 2%. The U.S. interest rate is not expected to change over time. Based on the information, explain how the forward premium (or discount) is expected to change by December 1.
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